(file photo) Photo: RNZ Pacific / Lydia Lewis
- Redacted receivers' report raises serious concerns about Du Val Group
- Irregular accounting, questionable asset values need further investigation
- Level of concerns about financial management of group warranted statutory management
Receivers for the collapsed Du Val property group have highlighted irregular accounting, questioned valuations of assets, and related party transactions which led to the group being placed into statutory management last month.
A redacted initial report from the receivers of accounting firm PwC last month has just been released on High Court orders and it said further investigations were needed into various aspect of the Du Val group's property and investment businesses.
"There is evidence of irregular accounting entries that have created assets that may not be legitimate and/or for which the recorded value is insufficiently supported."
The PwC report said there were also concerns about transactions involving a trust run by the Du Val group founders and directors, Kenyon and Charlotte Clarke.
The group was recorded as buying intellectual property from the trust for $15 million, which created a loan balance to the trust, with the balance later reduced to $5.5m.
"As Du Val Group NZ Limited (in Receivership) does not have financial records in Xero we have been unable to determine the associated funds flow supporting these positions," the report said.
"Further investigation is strongly recommended in this regard, including the basis for the initial purchase transaction and value attached."
Unsupported valuations
The report also looked at valuations used in offers presented to investors to turn their investments in individual funds into shares in the Du Val Property Group (DVPG).
"The information memorandum referenced an internally produced valuation agreed by the directors of DVPG of $306m to $431m," the report said, adding there no independent, external valuation.
The Du Val Group was placed into receivership early last month on the application on the Financial Markets Authority after an investigation into the group's affairs.
The initial receivers' report, which is the one just released, raised sufficient concerns for the FMA to recommend to the government to take the rarely used step to elevate the action to statutory management.
The receivers also reported evidence of business links and activities overseas, and that some of the Clarke's personal expenses had been paid by the group.
Commerce Minister Andrew Bayly said at the time the Du Val group had significant liabilities and its position was so complex and large that statutory management was needed to prevent broader harm.
One of the receivers, John Fisk, put the extent of the financial shortfall in the group as high as $250m.
There were four core Du Val corporations and 20 associated limited partnerships, and 46 subsidiaries. One subsidiary was excluded as it was 50 percent owned by a third party and operated independently of the Du Val Group.
Du Val Group investment funds were aimed at so-called wholesale investors, deemed to be experienced and knowledgeable about such investments. About 120 investors were involved in the group when it went into receivership.
The PwC receivers said statutory management would provide certainty to all parties and allow work to continue on Du Val's active construction projects.
